IB BM 3.2-3.4 Finance | Baamboozle - Baamboozle | The Most Fun Classroom Games!

IB BM 3.2-3.4 Finance

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Snippets Hair Salon Co. has annual fixed costs of $1.2 million. The company has an annual output of 150,000 customers, with a variable cost per customer of $15. Calculate the total annual costs for Snippets Hair Salon Co

TC = $1,200,000 (TFC) + $2,250,000 *TVC) = $3,450,000

Gardeners’ Pots has total costs of $2,000 and fixed costs of $1,100 for an output level of 600 units. Calculate the variable cost per unit for the firm. [2 marks]

TVC = TC – TFC = $2,000 – $1,100 = $900, AVC = $900 / 600 = $1.50

Graph out what total average costs, total fixed costs, and total costs would look like on a graph.

y-axis = costs, x-axis = output. total fixed costs = horizontal line, total average costs start at origin.

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